We propose an integrated model of the joint dynamics of FX rates and asset prices for the pricing of FX derivatives, including Quanto products; the model is based on a multivariate construction for Levy processes which proves to be analytically tractable. The approach allows for simultaneous...

This paper investigates how the ordering of variables affects properties of the time-varying covariance matrix in the Cholesky multivariate stochastic volatility model. It establishes that systematically different dynamic restrictions are imposed when the ratio of volatilities is time-varying....